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Lufthansa Fare Drop Mean Cost-Cutting Efforts Must Prevail

Published on Jul 30 2015 11:24 AM in General Industry tagged: Lufthansa / airline

Lufthansa Fare Drop Mean Cost-Cutting Efforts Must Prevail

Deutsche Lufthansa said it will push ahead with efforts to reap more savings as ticket prices continue to slide, potentially prolonging a battle with workers resisting management’s purge on costs.

“The price level for airline tickets will not recover,” Chief Financial Officer Simone Menne said after the company reported earnings on Thursday, adding that trading in the second half will be more challenging than in the first six months.

Earnings before interest and tax jumped 40 per cent to €607 million from €433 million  a year earlier, Cologne-based Lufthansa said in a statement Thursday, as fuel costs fell by 5.8 per cent. Yields, a measure of average fares, fell 5.7 per cent in the second quarter when adjusted for currency swings, the steepest decline in at least 11 quarters.

While the earnings provide some relief for Chief Executive Carsten Spohr, who had to cut financial targets twice last year, the comments serve as a warning to labor unions locked in a long-term fight to preserve benefits. The unions oppose Lufthansa’s plan to build out its Eurowings brand to become Europe’s third-largest low-cost carrier in an effort to better fend off discount competitors.

News by Bloomberg, edited by Hospitality Ireland

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